Lululemon Athletica has appointed former Nike executive Heidi O’Neill as its new CEO amid a sharp drop in sales and growing concerns about the brand’s future. The company had already been struggling before her appointment, with its core North American business showing signs of decline and customer loyalty weakening over time. O’Neill was appointed in April and officially took over the role on September 8 after a period of interim leadership from two top executives who had been managing the company since late January.
In the quarter before O’Neill took over the brand, Lululemon reported another poor performance, with a 12% drop in comparable sales in the Americas, according to Fortune. The company has also cut its full-year outlook for the second time in three months, raising questions about whether O’Neill can reverse the trend. She acknowledged that Lululemon’s problems are deep and complex, but she outlined a plan to return to what made the brand special in its early days. According to Lululemon, second-quarter net revenue fell 4% to $2.4 billion. Americas net revenue fell 8% while international net revenue increased 4%.
The company now expects full-year revenue to fall 5% to 7% to between $10.35 billion and $10.5 billion. It expects diluted earnings per share of $9.48 to $9.73.
O’Neill said her focus is on product innovation and re-establishing the emotional connection customers once had with Lululemon. One of the biggest challenges facing O’Neill is the steep decline in sales of leggings, which are central to the company’s identity and revenue. Analysts were surprised by the 20% drop in leggings sales during the most recent quarter, a figure that has raised alarm among investors.
Leggings make up about one-third of Lululemon’s revenue and are its highest-margin products, so their poor performance is especially damaging. The company's growth trajectory has slowed dramatically in recent years, with revenue rising sixfold from 2013 to 2025 before leveling off. Lululemon expanded into new product categories like footwear and outerwear in an effort to keep growing, but these moves have diluted its brand identity.
These expansions led the company into direct competition with established brands that had strong supplier relationships and deep market presence. Analysts say this kind of diversification can hurt a brand’s equity and reduce profit margins, especially when products don’t resonate with core consumers. In recent years, Lululemon has seen more items end up in discount bins, something that was rare during its rise as a premium brand.
Reuters reported that Lululemon's market share fell 10 percentage points to 43.9% in August based on M Science data. Alo gained 5.9 percentage points of share and Vuori gained 2.2 points.
O’Neill admitted that the company must go back to its roots to win back customer trust and loyalty. She emphasized that product quality and innovation are key to re-establishing Lululemon’s position in the market. Despite her experience at Nike, O’Neill faces skepticism from some investors who question whether she can successfully lead a turnaround.
Nike has also been dealing with similar issues, including a loss of focus on its core athletic products and a shift toward lifestyle branding. At Nike, O’Neill was credited with transforming the women’s business into a major revenue driver, but she also oversaw moves that shifted retail strategy away from partners to company-owned stores. Some analysts believe O’Neill’s background may be both a strength and a potential liability in her new role at Lululemon.
The market has reacted negatively to the company’s performance, with shares falling 80% since their peak in 2023. If O’Neill fails to deliver quick results, activist investors may push for management changes or board reforms. Lululemon founder and former CEO Chip Wilson has publicly criticized O’Neill’s appointment, saying she is likely to follow the same failed path as the company's board.
Wilson’s non-disparagement agreement with Lululemon expires in November 2027, after which he may resume criticizing both the board and O’Neill. The company is under pressure to show clear signs of recovery quickly as it navigates a challenging retail landscape and shifting consumer preferences.